On Track Innovations Ltd. Reports Second Quarter 2019 Financial Results
ROSH PINA, Israel, Aug. 7, 2019 /PRNewswire/ -- On Track Innovations Ltd. ("OTI") (NASDAQ: OTIV) (the "Company" or "OTI"), a global provider of near field communication (NFC) and cashless payment solutions, today provided a business update and announced financial results for the second quarter ended June 30, 2019.
Highlights
-- Revenues of $4.1 million in the second quarter, growth of 37% compared
to the first quarter of 2019 and a decrease of 28% compared to the
second quarter of last year.
-- Gross margin at 58% in the second quarter, at a multi-year high, in part
due to growing portion of recurring revenue out of the total.
-- Continued tight control over operating expenses which decreased by 6% in
the first half of 2019, versus the same period in 2018.
-- Delivered globally more than 10,000 advanced contactless readers to the
smart ATMs market, more than 8,000 advanced payment readers to the
Russian market, and more than 1,000 advanced payment systems to the
Japanese unattended retail market.
Management Commentary
Mr. Assaf Cohen, OTI's Interim CEO, commented, "We are pleased with the recovery in our results in the second quarter. The increase in revenue over the prior quarter gives us confidence that the issue we faced in the U.S. from the impact of tariffs is now behind us, and we have regained our positive momentum. Furthermore, in line with our long-term strategy, the recurring portion of our revenues continues to grow, and this has allowed us to see a solid improvement in the gross margin."
Mr. Cohen continued, "I would like to wish Mr. Shlomi Cohen, our former CEO, the best of luck in future with all his endeavors and thank him for the years he invested in OTI, in stabilizing the business and advancing its strategy. The Board is working to find a suitable replacement in the coming months."
Following OTI's sale of its MediSmart division in the fourth quarter of 2018, the financial results of Medismart are included as discontinued operations and all the prior periods' information has been reclassified to conform with the current period's presentation.
Second quarter 2019 financial results summary
-- Total revenue in the quarter was $4.1 million, compared to $5.7 million
in the same year-ago quarter. Revenues in the prior quarter were $3.0
million, and current quarter revenues represent a 37% sequential
improvement.
-- Recurring revenues were $1.2 million (29% of total revenues), compared
to $1.4 million (24% of total revenues) in the second quarter of 2018.
-- Gross profit in the quarter was $2.4 million, or 58% of revenues,
compared to $2.9 million, or 50% of revenues, in the second quarter of
2018.
-- Operating expenses totaled $3.2 million in the quarter, compared to $3.3
million in the same year-ago quarter.
-- Loss from continuing operations was $849,000 compared to $399,000 in the
same year-ago quarter.
-- Net loss was $899,000, or loss of $0.02 per share, compared to a net
loss of $280,000, or loss of $0.01 per share, in the same year-ago
quarter. Net loss in the prior quarter amounted to $1.7 million, or loss
of $0.04 per share.
-- Adjusted EBITDA loss from continuing operations was $442,000 in the
quarter, compared to adjusted EBITDA of $32,000 in the same year-ago
quarter. Adjusted EBITDA loss in the prior quarter was $1.1 million.
-- As of the end of the quarter, the company had cash and cash equivalents
and short-term investments of $5.7 million.
Conference Call
Management will host an investor conference call at 9:00 a.m. Eastern Time on August 12, 2019, to discuss the financial results, provide a corporate update, and conclude with a recorded Q&A session.
Investors and analysts are encouraged to submit questions they would like the Interim CEO to address on the call. Please submit questions to oti_questions@gkir.com by Thursday, August 8, 2019 at 5:00 p.m. Eastern time. OTI intends to hold conference calls in this format during the CEO transition phase and expects to return to the live format, upon the appointment of a permanent CEO.
To listen, please use the following dial-in information:
U.S. Dial-in: 1-888-317-6002
International Dial-in: +1-412-317-5245
Webcast: https://www.webcaster4.com/Webcast/Page/1720/30987
Please dial in a few minutes before the start of the call and request to join the "On Track Innovations Earnings Conference Call" to ensure timely participation.
The conference call will be available for replay by clicking here and via the investor relations section of the company's website.
About On Track Innovations Ltd
On Track Innovations (OTI) is a global leader in the design, manufacture, and sale of secure cashless payment solutions using contactless NFC technology. OTI's field-proven innovations have been deployed around the world to address cashless payment, automated retail and petroleum markets. OTI distributes and supports its solutions through a global network of regional offices and alliances. OTI is the proud recipient of the 2017 AI Award for Best Cashless Payment Solutions Provider - Israel. For more information, visit www.otiglobal.com.
Safe Harbor / Forward-Looking Statements
This press release contains express or implied forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other Federal securities laws. Whenever we use words such as "will," "look forward," "expect," "anticipate," "intend," "plan," "estimate," "believe," "should," "can" or similar expressions, we are making forward-looking statements. For example, we are using forward-looking statements when we discuss, among others: the Company's belief that the impact of tariffs is now behind it, and continued positive momentum. Because such statements deal with future events and are based on OTI's current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of OTI could differ materially from those described in or implied by the statements in this press release. Additional factors that could cause actual results to differ materially from those anticipated by our forward-looking statements are stated under the captions "Risk Factors" in our most recent Annual Report (Form 10-K) and other known and unknown uncertainties and risk factors including those detailed from time to time in the Company's filings with the Securities and Exchange Commission. Forward-looking statements are made as of the date of this release, and we expressly disclaim any obligation or undertaking to update forward-looking statements. The reader is cautioned not to place undue reliance on forward-looking statements.
Use of Non-GAAP Financial Information
This press release contains certain non-GAAP measures, namely, adjusted EBITDA from continuing operations, or adjusted earnings from continuing operations before interest, income tax, depreciation and amortization. Adjusted EBITDA from continuing operations represents earnings before interest or financing expenses, income tax, depreciation and amortization, and further eliminates the effect of patent litigation expenses, stock-based compensation expense and other expenses. Patent litigation expenses and other expenses are presented only at the end of each year, as we do not consider their impact on quarterly results to be material. OTI believes that adjusted EBITDA from continuing operations should be considered in evaluating the Company's operations since it provides a clear indication of the Company's operating results. This measure should be considered in addition to results prepared in accordance with U.S. GAAP, but should not be considered a substitute for the U.S. GAAP results. The non-GAAP measures included in this press release have been reconciled to the U.S. GAAP results in the tables below.
ON TRACK INNOVATIONS LTD.
RECONCILIATION OF NON-GAAP ADJUSTMENT
The following table reflects selected On Track Innovations Ltd. non-GAAP results reconciled to GAAP results:
(US dollars in thousands)
Three months ended Six months ended
June 30, June 30,
2019 2018 2019 2018
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
Net loss $(899) $(280) $(2,644) $(613)
Net loss (income)
from discontinued
operations 50 (119) 243 (186)
Financial expenses,
net 37 95 106 127
Depreciation and
amortization 323 345 643 680
Taxes on income 3 (141) 8 (265)
---
Total EBITDA FROM
CONTINUING
OPERATIONS $(486) $(100) $(1,644) $(257)
Other expenses 70 70
Stock-based
compensation 44 62 90 115
---
Total adjusted
EBITDA FROM
CONTINUING $(442) $32 $(1,554) $(72)
OPERATIONS
ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(US dollars in thousands)
June 30, December 31,
2019 2018
Assets
Current assets
Cash and cash equivalents $3,575 $4,827
Short-term investments 2,105 1,078
Trade receivables (net of
allowance for doubtful
accounts of $564 and $555
as of June 30, 2019
and December 31, 2018,
respectively) 2,793 4,530
Other receivables and
prepaid expenses 1,457 2,060
Inventories 4,929 3,527
Asset held for sale 764
Total current assets 15,623 16,022
Long-term restricted
deposit for employees
benefit 463 451
Severance pay deposits 394 375
Property, plant and
equipment, net 3,981 5,033
Intangible assets, net 262 241
Right-of-use assets 1,696
Total Assets $22,419 $22,122
ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(US dollars in thousands)
June 30, December 31,
2019 2018
Liabilities and Equity
Current Liabilities
Short-term bank credit and current maturities
of long-term bank loans $2,811 $260
Trade payables 5,226 4,712
Other current
liabilities 2,248 3,622
Total current
liabilities 10,285 8,594
Long-Term Liabilities
Long-term loans, net of
current maturities 27 39
Long-term liabilities
due to operating
leases, net of current
maturities 1,092 -
Accrued severance pay 916 853
Deferred tax liability 424 445
Total long-term
liabilities 2,459 1,337
Total Liabilities 12,744 9,931
Commitments and Contingencies
Equity
Ordinary shares of NIS 0.1 par value; Authorized:
50,000,000 shares as of June 30, 2019 and
December 31, 2018; issued: 42,503,076 and
42,473,076 shares as
of June 30, 2019 and December 31, 2018,
respectively;
outstanding: 41,324,377 and 41,294,377 shares
as of June 30, 2019, and
December 31, 2018,
respectively 1,069 1,068
Additional paid-in
capital 225,111 225,022
Treasury shares at cost -1,178,699 shares as of
June 30,
2019 and December 31,
2018 (2,000) (2,000)
Accumulated other
comprehensive loss (918) (956)
Accumulated deficit (213,587) (210,943)
Total Equity 9,675 12,191
Total Liabilities and
Equity $22,419 $22,122
===
ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(US dollars in thousands, except share and per share data)
Three months ended Six months ended
June 30, June 30,
2019
*2018 2019
*2018
Revenues
Sales $2,933 $4,352 $4,655 $8,593
Licensing and transaction fees 1,183 1,387 2,474 2,658
Total revenues 4,116 5,739 7,129 11,251
Cost of revenues
Cost of sales 1,742 2,849 3,112 5,481
Total cost of revenues 1,742 2,849 3,112 5,481
Gross profit 2,374 2,890 4,017 5,770
Operating expenses
Research and development 817 806 1,688 1,626
Selling and marketing 1,320 1,464 2,605 3,109
General and administrative 1,046 1,065 2,011 1,972
Total operating expenses 3,183 3,335 6,304 6,707
Operating loss from continuing
operations (809) (445) (2,287) (937)
Financial expenses, net (37) (95) (106) (127)
Loss from continuing operations
before taxes on income (846) (540) (2,393) (1,064)
Income tax (3) 141 (8) 265
Loss from continuing operations (849) (399) (2,401) (799)
Net (loss) income from
discontinued (50) 119 (243) 186
operations
Net loss $(899) $(280) $(2,644) $(613)
Basic and diluted net (loss)
income
attributable to shareholders
per ordinary
share
From continuing operations (0.02) (0.01) (0.06) (0.02)
From discontinued operations
**
**
** 0.01
$(0.02) $(0.01) $(0.06) $(0.01)
Weighted average number of
ordinary shares
used in computing basic and
diluted net (loss)
income per ordinary share 41,300,641 41,271,644 41,297,526 41,243,169
* Reclassified to conform with the current period presentation.
** Less than $0.01 per ordinary share.
ON TRACK INNOVATION LTD.
INTERIM UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(US dollars in thousands)
Six months ended
June 30,
2019 * 2018
Cash flows from continuing
operating activities
Net loss from continuing
operations $(2,401) $(799)
Adjustments required to
reconcile net loss to
net cash used in continuing
operating activities:
Stock-based compensation
related to options issued
to employees and others 90 115
Accrued interest and linkage
differences, net (18) 7
Depreciation and amortization 643 680
Deferred tax benefits, net (24) (281)
Gain on sale of fixed assets (2) (17)
Changes in operating assets
and liabilities:
Accrued severance pay, net 44 (28)
Decrease in trade receivables,
net 1,254 1,051
Decrease in other receivables
and prepaid expenses 597 249
Increase in inventories (1,405) (344)
Increase (decrease) in trade
payables 585 (567)
Decrease in other current
liabilities (540) (528)
Net cash used in continuing
operating activities (1,177) (462)
Cash flows from continuing
investing activities
Purchase of property and
equipment (221) (414)
Change in short-term
investments, net (1,190) 1,173
Investment in capitalized
product costs (120) (87)
Proceeds from restricted
deposit for employee benefits 10
Proceeds from sale of fixed
assets 10 17
Net cash (used in) provided by
continuing investing
activities (1,511) 689
Cash flows from continuing
financing activities
Increase (decrease) in short-
term bank credit, net 2,747 (80)
Repayment of long-term bank
loans (233) (348)
Proceeds from exercise of
options 34
Net cash provided by (used in)
continuing financing
activities 2,514 (394)
Cash flows from discontinued
operations
Net cash (used in) provided by
discontinued operating
activities (1,304) 289
Total net cash (used in)
provided by discontinued
operations (1,304) 289
Effect of exchange rate
changes on cash and cash
equivalents 53 (288)
Decrease in cash, cash
equivalents and restricted
cash (1,425) (166)
Cash, cash equivalents and
restricted cash-beginning of
the period 5,105 7,799
Cash, cash equivalents and
restricted cash-end of the
period $3,680 $7,633
(*) Reclassified to conform with the current period presentation.
Investor Relations Contact:
Gavriel Frohwein
GK Investor & Public Relations
+1 646 688 3559
oti@gkir.com
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SOURCE On Track Innovations Ltd. (OTI)
